In a significant judgment, the Delhi High Court has set aside a Goods and Services Tax (GST) demand exceeding ₹12 crores levied on Exide Industries, a leading storage battery manufacturer. The division bench, comprising Justices Prathiba M. Singh and Rajneesh Kumar Gupta, found procedural lapses in the adjudication process, particularly concerning the denial of a fair hearing to the petitioner. However, acknowledging Exide Industries' own shortcomings in responding to hearing notices, the court imposed a cost of ₹1 lakh on the company, payable to the Delhi High Court Bar Association.
The dispute originated when Exide Industries challenged a final order and Form DRC-07 issued by the Adjudicating Authority, which sought to recover alleged GST dues from the company. The controversy centered on the alleged wrongful availment of Input Tax Credit (ITC) by Exide Industries. A show cause notice (SCN) was issued to the company on May 17, 2024, to which Exide responded on June 10, 2024. Subsequently, a personal hearing was scheduled for November 20, 2024. Exide contended that it did not receive the hearing notice. Another hearing was fixed for December 5, 2024, for which Exide sought an extension to December 19, 2024. However, a notice for a personal hearing on December 16, 2024, was served, which, according to Exide, was received on the date of the hearing itself. Despite these developments, Exide's representatives visited the Respondent's office, but the impugned order was passed without affording any further hearing.
The court, upon reviewing the sequence of events, observed that there was evident laxity on the part of Exide Industries in responding to the repeated hearing notices issued by the Department. Nevertheless, the court also recognized that Exide was not afforded a proper hearing, despite some attempts made by the company to engage with the Department. This denial of a fair hearing constituted a breach of the principles of natural justice.
Consequently, the Delhi High Court set aside the impugned GST demand, subject to Exide Industries depositing a cost of ₹1 lakh with the Delhi High Court Bar Association. The court further directed the Adjudicating Authority to issue a fresh hearing notice, ensuring that Exide Industries is granted an adequate opportunity to present its case.
This judgment underscores the importance of adherence to procedural fairness and the principles of natural justice in tax adjudication processes. While taxpayers are expected to respond diligently to notices and participate actively in proceedings, tax authorities are equally obligated to ensure that taxpayers are afforded a fair and reasonable opportunity to be heard before any adverse decisions are made.
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